Lifting the Offer: Bitcoin trading analysis for the week of July 13th, 2015

The bitcoin market is certainly heating up with the weather. The past two weeks have been remarkable with the price rising over 15% and industry volumes (as tracked by the XBX Index) hitting a four-month high. The events in Greece and China have been key drivers of the bitcoin price and traders should continue to keep a close eye on the situations in both countries.

Best Bits from Last Week

Bitcoin Price Recap

The rapid changes in price over the past week are reflected in the increased volatility in the market which has picked up since hitting 2015 lows in early June (see chart below). To put this in perspective, the average difference between intra-day highs and lows over the past two weeks was nearly 5% compared to 2.6% over the previous two weeks. The wildest swing in the market came last Friday morning (7/10) when there was a roughly $90 difference between the Asian and US exchanges with the bitcoin price reaching $375 in Asia.

The decline in trading volume, prices and leverage (risk) put on by traders in the Shanghai Composite and the economic uncertainty in Greece have been widely speculated to be key drivers of the bitcoin price. A prime example is the agreement reached between Greece and the EU on a third bailout which was followed by a 10% drop in the bitcoin price.

Also noteworthy are the correlations between the bitcoin and litecoin markets. The litecoin market alone was up nearly 72% from Monday to Friday and is now down 95% from Friday to today. The bottom line is that bitcoin is no longer an uncorrelated asset class, but is now closely linked to traditional economic events and other digital currencies.

Bitcoin Trading Week Ahead

Looking ahead, traders can expect a more subdued and stable market this week post-Greek bailout. It should take traders a few days to digest the latest price movements in the bitcoin market as well as the finer details outlined in the latest Greek bailout plan.

Given how strongly the bitcoin market has reacted to events in Greece recently, traders should keep an eye on whether the bailout agreement between Greece and the EU is formally executed this week.

Bobby Cho is the Director of the Institutional Client Group at itBit. Previously, Bobby was Vice President of Trading at SecondMarket specializing in trading bitcoin and illiquid asset-backed securities. Comments? Feedback? Shoot Bobby an email.

Crypto asset trading involves a high degree of risk. The crypto asset market is new and unproven and may
not grow. Currently, there is relatively small use of crypto assets in the retail and commercial
marketplace in comparison to relatively large use by speculators, thus contributing to
price volatility that could adversely affect an investment in crypto assets. In order to
participate in the trading of crypto assets, you should be capable of evaluating the
merits and risks of the investment and be able to bear the economic risk of
losing your entire investment. No material at this site should be considered
as an offer by itBit to sell or solicitation by itBit of any offer to buy bitcoin or other crypto assets.